Greenhouse Gas Emission Quotas Proposed to Become a Trading Subject – Draft Law

The Verkhovna Rada has registered draft law No. 15386, which provides for amendments to a number of Ukrainian laws to create and operate a national system for trading greenhouse gas emission quotas (NSTQ).

The draft Law on the national system for trading greenhouse gas emission quotas proposes integrating the new system into existing legislation, defining the powers of state authorities, clarifying terms, and establishing procedures for the functioning of the quota trading mechanism.

Main provisions of the draft law

• Definition of two phases of the NSTQ for gradual launch.
• List of types of activities and greenhouse gases subject to regulation.
• Participants: installation operators, airlines, shipping companies, and other market players.
• Procedures for issuance, circulation, and cancellation of quotas, price caps, market stabilization reserve.
• Free allocation of quotas in certain cases.
• Creation of the NSTQ registry.
• Financial support for decarbonization through a state fund.
• Liability for violations.

Proposed changes to the Code of Administrative Procedure

The draft law proposes supplementing the Code of Administrative Procedure of Ukraine with a new ground for securing a claim. This concerns the possibility of suspending decisions of the competent authority in the field of quota trading, including cancellation of greenhouse gas emission permits, refusal to issue them, or making amendments. It also provides for the possibility of imposing prohibitions or obligations on the authority or its officials regarding certain actions.

New procedure for obtaining emission permits

Amendments to the Law of Ukraine "On Atmospheric Air Protection" stipulate that operators of installations subject to the quota trading system will receive greenhouse gas emission permits through a special procedure.

With such a permit, a separate permit for emissions of pollutants into the atmospheric air under the conditions defined by the greenhouse gas emission permit will not be issued.

Quota trading integrated into the capital market

The draft law proposes extending the application of the Law of Ukraine "On Capital Markets and Organized Commodity Markets" to relations related to quota trading, except when an operator purchases quotas solely for their subsequent cancellation without resale.

It also proposes legally defining the terms "quota" and "operator" according to the future law on the quota trading system.

Changes to state control rules

Amendments to the Law of Ukraine "On the Basic Principles of State Supervision (Control) in the Sphere of Economic Activity" are proposed to clarify relations not covered by its scope. In particular, this concerns monitoring generally accepted market practices in the quota trading system, control over compliance with prohibitions on market manipulation of quotas, and the use of insider information.

At the same time, it is proposed to introduce state control over compliance with requirements for obtaining or changing greenhouse gas emission permits, as well as payment of fines.

Emission permit will become a separate permit document

The Law of Ukraine "On the List of Permitting Documents in the Sphere of Economic Activity" is proposed to include a new document — a greenhouse gas emission permit.

Updating the emission monitoring system

Significant changes are proposed to the Law of Ukraine "On the Principles of Monitoring, Reporting, and Verification of Greenhouse Gas Emissions."

The draft law clarifies definitions of several terms, including "type of activity," "greenhouse gas emissions," "Unified Register," and "authorized body." Some terms, including "greenhouse gases," "operator," and "installation," are proposed to be excluded from this law and applied as defined by the new law on the quota trading system.

It is also proposed to exclude the Cabinet of Ministers' authority to approve the list of types of activities and clarify the authorized body's powers regarding delegation of certain functions to enterprises whose corporate rights are managed by the state.

Certain types of activities will be excluded from another law

Amendments to the Law of Ukraine "On Integrated Prevention and Control of Industrial Pollution" provide that its scope will not apply to certain types of activities defined by law that lead to greenhouse gas emissions and will be regulated by the quota trading system.

Subscribe to our Telegram channel t.me/sudua and to Google News SUD.UA, as well as to our VIBER and WhatsApp, our page on Facebook and on Instagram to stay informed about the most important events.